The hottest market to be in right now is deals. From Living Social to Groupon, finding a deal in your city is easier than ever. With big brands like Gap, Barnes & Noble, and Amazon already having joined in on the party, the sports world is starting to turn their attention toward this rapidly growing market.

While there have been a few sports teams who have experimented with offering discounted ticket deals through deal sites (see New Jersey Nets), sports teams need to consider the financial and brand ramifications that come from slashing ticket prices in the exchange of selling off inventory.

Win-Win Situation?

Speaking with other sports professionals, the biggest reason why they would consider working with a Groupon or Living Social is to help them move inventory that they wouldn’t normally be able to sell in a limited amount of time. Typically, this would mean tickets for a game less than a few days away.

At first glance, this would seem like a win-win situation: Fans get a great deal and the team sells off inventory that would have otherwise been considered a loss. Still, if we dig closer we will see that is not always the case.

Things To Consider

While we’ve all heard about the success stories of deal sites helping businesses grow their customer base, what rarely makes the headlines are the stories of how deal sites hurt them.

For example, profitability should be a huge red flag for any sports team looking to sell off tickets and inventory quick. In most cases, not only would a team have to offer a deal at 50% or more, they would also need to split revenue of those sold with the deal site. Groupon which can take anywhere from a small amount to 100% of the revenue depending on how much the deal price is set at (see Posies Restaurant), can make covering basic overhead costs near impossible.

Further, Utpal Dkolakia, associate professor of marketing at the Jones Graduate School of Business at Rice University, recently published an in-depth review of one-a-day deal site Groupon and reported that 32% of companies said that the Groupon campaign was unprofitable with only 25% of redeemers buying additional products beyond the ones offered through the coupon and only 15% of coupon users coming back.

Another important factor to consider is who the deal is being targeted toward: Is it being marketed toward your fans or is it being marketed toward deal seekers and one-time shoppers? For sports teams especially, they need to remember that coupons make customer loyalty go out the window. As stated before, only 15% of Groupon users are coming back, which means that for a sports organization they would lose money in the long-run since their is no customer retention.

Lastly, sports teams need to consider not only the financial aspect of working with a one-a-day deal site, but also need to consider the following:

Sponsorship – Getting a sponsor to take part in a one-day-deal is difficult (maybe impossible), because of the numerous league rules that govern promotions and sponsorships. No sponsorship means that a team must rely strictly on the ticket revenue that is shared with them and the in-stadium up-sell.

Alternatives to Deal-A-Day Sites

While the appeal of deal-a-day sites may seem too good to pass up, there are other alternatives for sports teams looking to sell extra tickets and future inventory. Here are a few of them:

1. Create your own deal-a-day. Sports teams don’t need to necessarily work with a deal site to offer great packages and tickets to fans. The Los Angeles Clippers are a great example. Through their official fan engagement site, myClipper NATION, they were able to create “Fastbreak Friday” which offered registered user (Clippers able to capture and own user data) exclusive offers. The Clippers were able to set their own prices and keep 100% of their revenue.

2. Consider creating a loyalty program. While many focus on the immediate goals of selling inventory fast, why not create a loyalty program that gets fans to come back? Loyalty programs are great because they encourage fans to come back and are also great for building up a fan base by offering them incentives (that the team controls and creates).

Joseph is the Social Media & Marketing Solutions Manger at GAGA Sports & Entertainment where he works with professional sports teams, including the Lakers, Clippers, and San Francisco 49ers, where he develops engaging content as well as social media and digital strategies to help teams better understand and engage their fans.

7 Responses to Should Sports Teams Use Deal-A-Day Sites?

I’ve had this come up with consulting work for sports clients… I agree with these points – not only is profitability an issue, but brand erosion and training your market to only seek deals is dangerous…

Great points, Joseph, and I think you made the case for why sports teams should be very wary of going down the daily deals path with a 3rd party. But if putting butts in seats is your main goal (at the cost of your brand and training your ticket-buyer base to hunt for deals), then perhaps these sites are an option.

Great points here. I like how the Clippers have handled this. By controlling the process, you not only can ensure that you can collect all the data, but you don’t have to share revenue and can create whatever deals you want- tickets, concessions, merchandise, a mixture, etc.

The other use for these sites that maybe people don’t consider as much is as part of a fan acquisition program. This could be especially beneficial for teams that are in the minor leagues or in smaller markets. Yes this is going to cost some money, but might be worth it if you look at the numbers–even if a majority of deal buyers don’t come back. Hard to say for sure without running the numbers.